Based on the following information from ABC Company's financial analysis, which one of the following statements is true? Ratio Gross profit ratio Net profit ratio PP&E turnover ratio Current ratio Debt to equity Return on equity Year 1 35.7% 11.7% 14.2 5.4 1.5 12.6% Year 2 34.6% 12.5% 13.8 6.7 1.3 14.5% Year 3 36.9% 14.9% 4.9 6.1 0.8 14.1% Year 4 38.6% 15.1% 72 72 0.7 15.7% Year 5 41.5% 18.3 % 9.4 6.3 0.4 16.2% The company has increased operating expenses over the five years. The company's ability to cover its short-term obligations is getting higher over the five years. The company's ability to cover its long-term debt is getting lower over the five years. The company might have invested too much PP&E in year 3

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived fro…

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.